美國安進 (AMGN) 2010 Q1 法說會逐字稿

Welcome to the Onyx Pharmaceuticals first-quarter results conference call.

My name is Monica and I will be your operator for today's call.

At this time all participants are in a listen-only mode.

Later we will conduct a question-and-answer session.

Please note that this conference is being recorded.

I would now like to turn the call over to Onyx Pharmaceuticals.

Onyx Pharmaceuticals, you may begin.

Thank you.

Good afternoon.

I'm Julie Wood, Vice President of Corporate Communications and Investor Relations at Onyx Pharmaceuticals.

We thank you for joining us for our first quarter 2010 financial results conference call.

Leading our call is Onyx President and Chief Executive Officer, Dr.

Tony Coles.

Also providing updates from the teleconference are Laura Brege, Chief Operating Officer; Dr.

Ted Love, Head of R&D; and Matt Fust, Chief Financial Officer.

Also available during the Q&A session are Dr.

Michael Kauffman, Chief Medical Officer; and Dr.

Todd Yancey, Senior Vice President of Clinical Development.

Please note that we will be making forward-looking statements during this teleconference that could include financial, clinical or commercial projections.

Statements that are not historical facts are forward-looking.

References to what we expect, believe, intend to do, plan, estimate or other statements referring to future events or results are intended to identify these statements as forward-looking.

Forward-looking statements are inherently subject to risks and uncertainties.

For a discussion of these risks and uncertainties, we refer you to our 10-K for the year ended December 31, 2009, as well as to our 10-Q for the first quarter 2010.

In addition, we will be presenting and discussing non-GAAP financial measures during the teleconference.

For a reconciliation of these non-GAAP financial measures to the corresponding GAAP measures, please see today's press release which is posted on the Onyx website.

A slide presentation of supplements to financial information in this teleconference is also available on our website.

The information is located on the financial information page within the investor section.

I would now like to turn the call over to Tony Coles, who will begin the discussion of an overview of our business.

Tony?

Thanks, Julie.

Good afternoon and thanks for joining us.

Let me start by saying that two years ago, we set out to create and implement a strategic plan that would position Onyx as an emerging oncology leader with a deep and diversified pipeline, maximize the opportunity with Nexavar and exercise the kind of financial discipline that would enable focused investments in our future.

We believe Onyx has significant potential for growth and numerous ways to win as a result of this multifaceted strategy.

Importantly, we have opportunities for imminent value creation with several potentially game-changing milestones ahead, and we believe we have the right assets with which to build this value as we have actively created a pipeline of novel therapeutic agents that are emerging as unique and potentially best-in-class molecules.

With Nexavar, we continue to see compelling evidence that suggests Nexavar is a unique agent with a mechanism of action that could set it apart even from other multi-kinase inhibitors.

Currently, Nexavar is the only approved targeted systemic therapy for liver cancer and continues to be an important agent in kidney cancer.

Given its broad activity, including its unique inhibition of the important cancer-related molecular pathway for RAS and RAV, we believe Nexavar may play a differentiating role in the treatment if multiple types of cancers.

Over the last several months, evidence observed in three different tumor types supports this belief, starting with encouraging data from two large randomized Phase II trials examining Nexavar in breast cancer, a disease where other kinase inhibitors have failed in the clinic and, more recently, in lung cancer, with a Phase II study that looked at biomarker status in relation to treatment outcomes.

And, just last month, Nexavar's exclusive status as the only systemic targeted agent available and proven to extend the lives of liver cancer patients was confirmed.

Even with this considerable promise, our business is not immune to macroeconomic and business pressures, including some that have negatively affected first-quarter sales.

This underscores the importance of our comprehensive growth strategy and our focus on new and highly differentiated pipeline compounds that offer numerous ways to win.

Despite these pressures, we believe there are significant opportunities to broaden our business with double-digit growth of Nexavar sales this year and continued growth in the years to come.

As we've built our pipeline we've sought innovative compounds that have significant therapeutic promise.

For this reason we acquired Proteolix, which brought three compelling investigational agents into our portfolio.

The most advanced of these, carfilzomib, has the potential to be our second launched product, perhaps as early as next year, through the accelerated approval process in the US.

We believe that carfilzomib could bring benefit to patients with multiple myeloma who, despite treatment advances, still succumb to their disease.

And, with global rights for this and our other proteasome inhibitors, we have the strategic flexibility with which to maximize and leverage our opportunities while establishing our position as a hematology and oncology leader.

Today we also announced the expansion of our agreement with S*BIO that will accelerate the development of two compelling JAK2 inhibitors, firmly establishing our expanded presence in hematologic diseases and potentially in autoimmune disorders.

JAK2 inhibitors have been implicated across a broad range of difficult to treat illnesses including cancer, rheumatoid arthritis, psoriasis and a variety of other autoimmune diseases.

Clearly, success with any one of these compounds could provide considerable upside to our business.

As a result, we see 2010 as an important year of value creation for Onyx as we advance each of our core assets in a strategic and targeted manner and accelerate our momentum.

As this happens, we expect to see new revenue streams fueling continued growth while enriching the lives of patients.

We believe we have the assets in place to achieve this including, first, Nexavar as the core engine of our business which is driving positive cash flow in its two currently approved indications as well as generating exciting data in a number of additional tumor types.

Second, carfilzomib's entry into the $4 billion and growing multiple myeloma market; and finally, our pipeline, fueling longer-term sustained growth with multiple shots on goal.

We like the prospects in our business today and enthusiastically look forward to building this broad value across a number of diseases and settings.

Now I'd like to turn the call over to Laura Brege for a discussion of our commercial business.

Thank you, Tony.

In the first quarter, Nexavar global net sales were $214 million, representing a 20% increase year-over-year.

This revenue included approximately $54 million in US sales and $160 million from sales outside of the United States.

Globally, Nexavar sales fell short of what was expected in the first quarter.

Outside the United States, this was primarily due to foreign currency exchange rates where we reduced our reported sales in US dollars and lower-than-expected Nexavar sales growth in Japan.

We also saw increasing competition in the kidney cancer market.

Despite these near-term pressures, we are optimistic about Nexavar's prospects for this year and the years ahead and are encouraged that global sales increase sequentially through each of January, February and March of this year.

In liver cancer we believe there is significant potential to build upon Nexavar's continued leadership position.

In the more established markets there continue to be additional opportunities for growth and market expansion takes time.

The good news is that just two weeks ago Nexavar's exclusive status as the only systemic targeted agent shown to extend the lives of liver cancer patients was confirmed and gives us the opportunity to realize the benefit from our clinical investments as we continue to build and expand the leadership presence for (technical difficulty) Nexavar worldwide.

Specifically, our efforts have been concentrated on three areas.

First, we've been identifying additional liver cancer prescribers and have been successful at doing so as demonstrated in the United States with a number of unique non-oncology prescribers, up approximately 30% compared to the first quarter of 2009.

And importantly, the total volume of Nexavar prescriptions that they are responsible for has increased to over 40% year-over-year.

Second, in the United States, with only a little more than half of liver cancer patients that are eligible for Nexavar being treated, we expect to reach an additional 30% of patients, increasing both the absolute number of new patients and the duration of therapy.

And as the incidence of hepatitis C continues to grow and as hepatitis C patients continue to live longer with currently available and emerging therapies, the overall patient population is expected to grow.

And, finally, our commitment to sustained leadership is poised to bear fruit as important trials to generate additional data in liver cancer are completing enrollment this year.

These studies include a global registration enabling adjuvant study as well as combination trials with local regional therapies such as TACE and also a combination with another targeted agent.

Beyond the growth we anticipate in the more established regions, we continue to expect considerable market expansion as we secure reimbursements in additional geographies, particularly in the Asia-Pacific region, which accounts for over 60% of the annual cases of liver cancer.

With the recent approval of Nexavar in Taiwan, Nexavar is now commercially approved in all of the major Asia-Pacific markets.

Reimbursement remains the next important step in South Korea, China and Taiwan.

In South Korea we continue to expect reimbursement for liver cancer this year, so now in the second half of 2010.

And with a leading incidence of liver cancer worldwide, China is an important market for Nexavar and continues to be a top contributor of Nexavar sales, even ahead of reimbursement, which we expect in 2011.

Looking at kidney cancer, Nexavar remains an important agent for the treatment of patients with this disease with over four years of commercial presence and physician experience.

In 2009 there were three additional entrants in this marketplace and more are expected in the future which we anticipate will result in ongoing market share pressures.

However, we believe that Nexavar's demonstrated safety and efficacy profile is helping to ensure its place among the increasing number of treatment options.

In summary, Nexavar is benefiting tens of thousands of patients worldwide and providing Onyx with an important engine for growth.

Based on Nexavar's revenues and the resulting cash flow, we were able to invest strategically across our pipeline and build our Company aggressively.

As part of this planning we're developing our US marketing strategy for carfilzomib so that Onyx will be ready to move quickly with our second product launch, should we be successful in securing accelerated approval.

Now I'll turn the call over to Ted to discuss our clinical development programs.

Thank you, Laura.

As Tony mentioned, we are generating compelling clinical data in a broad range of tumor types and settings, underscoring our growing clinical momentum in multiple large cancer indications.

In non-small cell lung cancer we have a Phase III program underway exploring Nexavar's activity in several different lines of therapy, both as monotherapy and in combination with chemotherapy.

We expect to report top-line results from our most advanced study in lung cancer, the NExUS trial, in the mid part of this year.

This 900-patient registration enabling study is focused on evaluating Nexavar in combination with gemcitabine and cisplatin in first-line patients.

We are also conducting a Phase III monotherapy trial called MISSION to assess Nexavar as a single agent in patients with advanced lung cancer who have relapsed after two or three previous treatment regimens.

Additionally, multiple Phase II studies are underway exploring Nexavar's utility in combination with other targeted therapies.

As previously mentioned, Nexavar's unique mechanism of action may differentiate it from other targeted therapies, especially in cancers where RAS/RAP pathway plays a role, such as lung cancer.

This is demonstrated in the recent Phase II BATTLE results announced last month.

In this innovative trial, patients with advanced non-small cell lung cancer who had failed prior systemic therapy were adaptively randomized to one of four treatments based on tumor biomarker status.

As data was generated within the study to correlate disease control by biomarker and drug, subsequent patients were more likely to be randomized to the drug that appeared to be most active against their tumor.

The primary endpoint of the trial was disease control at eight weeks.

As a result of the adaptive trial design and Nexavar's activity, 40% of all the patients received Nexavar.

In addition, Nexavar produced the highest overall disease control rate in the study, irrespective of biomarker status.

The disease control rate for patients with EGFR wild-type status was 64%.

Within this subset, those patients with K-RAS mutations showed a disease control rate of 61%, and those without K-RAS mutations showed a disease control rate of 56%.

In short, Nexavar performed the best in patients with wild-type EGFR status, which represents approximately three-quarters of all lung cancer patients, regardless of K-RAS status.

As a reminder, K-RAS mutations are also found in several other cancers, including colorectal cancer, a tumor type in which we recently completed enrollment in a Phase II trial and in differentiated thyroid cancer, where we have initiated a confirmatory Phase III registration study.

Now turning to breast cancer, we are building on the compelling data we reported last fall, where we saw a 74% improvement in [correction-free] survival in patients treated with Nexavar/capecitabine combination compared to patients receiving capecitabine alone.

Based on these results, we are initiating a pivotal Phase III breast cancer trial in the second half of this year, evaluating Nexavar in combination with capecitabine, potentially representing a new, completely oral-based treatment for patients with breast cancer.

Additionally, we expect to report data this year from the randomized Phase III trial evaluating Nexavar in combination with gemcitabine and capecitabine in women with breast cancer who have progressed on Avastin.

And, as part of our comprehensive commitment to breast cancer, we are also currently enrolling patients in a fourth Phase II study evaluating Nexavar in combination with docetaxel and the aromatase inhibitor letrozole.

Together, these four studies, known collectively as the TIDES program, are designed to help us identify the most promising registration paths for treatment of breast cancer patients across a range of treatment settings and drug combinations.

Now moving to carfilzomib, we have two distinct pathways for potential regulatory approval.

First, we have the opportunity for accelerated US approval based on the results of a Phase IIb study of carfilzomib in patients with relapsed refractory multiple myeloma whose disease has progressed despite multiple treatments with available therapies.

In a disease that is always fatal, these patients represent a population in which no alternative therapy exists.

We expect top-line data from this study in the middle of this year, which could serve as the basis for a potential NDA filing by year end.

In addition, for European registration, we plan to begin our Phase III study of single-agent carfilzomib shortly, comparing the agent's efficacy to that of best supportive care.

We also plan to seek use of carfilzomib early in the course of the disease in the relapse setting, through a 700-patient international Phase III combination study which is expected to begin within the month.

We've completed a special protocol assessment, or SPA with the FDA for this trial, which will evaluate carfilzomib in combination with Revlimid and low-dose dexamethasone, two drugs that comprise a standard of care in this setting.

Before closing, I would like to mention the expanded agreement with S*BIO in the JAK2 inhibitor field that was announced today.

As we can see from recently announced data across the sector and recently completed transactions, JAK2 inhibitors represent an exciting emerging class of therapeutics in an area of intense clinical and scientific interest.

We are especially excited about the two compounds that are the subject of our collaboration, given the early activity demonstrated to date, including parliamentary clinical data that suggests potential benefit in patients with myeloproliferative disorders and a variety of other hematologic malignancies.

In summary, we are executing a comprehensive development plan to bring much-needed breakthrough therapies to cancer patients and their families.

With success in any one of these high potential areas, we expect to continue building Onyx into an oncology later.

Now I'd like to turn the call over to Matt for the financials.

For the first quarter of 2010 Onyx reported a non-GAAP net loss of $1.5 million or $0.02 per share on a fully diluted basis.

As a reminder, we report non-GAAP information as a meaningful measurement of core corporate performance.

The non-GAAP net income calculation excludes non-cash items, the details of which are described in today's press release and posted on our website.

As Laura outlined, while reported Nexavar sales for the first quarter of 2010 grew 20% over the first quarter of 2009, global sales for the quarter fell short of our expectations.

Most of this sales shortfall was due to foreign currency exchange rate movement, as the euro weakened approximately 7% against the US dollar during the quarter to an average of $1.38 per euro for the period.

Research and development expense of $44 million in the first quarter of 2010 was comprised primarily of Onyx's share of Nexavar product development expense and of costs for the carfilzomib development program.

Nexavar development spending is principally directed at broad Phase III program which is currently underway.

For the full year 2010 we are reiterating our guidance of a $35 million to $50 million increase in net research and development expense compared to 2009.

This guidance includes the cost of our comprehensive carfilzomib development program and excludes corporate development expenses such as the S*BIO transaction announced today.

Onyx's selling, general and administrative expense was $25 million in the first quarter of 2010, 13% higher than the same period last year, primarily due to infrastructure expansion associated with the Proteomics acquisition.

As a reminder, the contingent consideration expense line on our P&L is a non-cash charge representing the time value of money associated with potential future milestone payments under the Proteomics acquisition agreement.

Future changes in our estimates of the Proteomics payment obligation would also be reported on this line.

We ended the first quarter with approximately $585 million of cash and investments, maintaining the financial strength and flexibility for the Company and, during April, we made the first milestone payment due under the Proteolix acquisition agreement, in the amount of $40 million.

That amount will not flow through our income statement in 2010 because it was accrued as a current liability when the transaction closed in November of 2009.

As you heard from Laura and Tony, we expect continued growth for Nexavar sales in 2010.

However, there are macroeconomic and business pressures that may impact Nexavar sales this year.

As a consequence, we are changing our 2010 Nexavar net sales guidance.

We anticipate global sales will now be in a range of $925 million to $975 million for the year, representing 10% to 15% annual growth over 2009.

As is custom on our year-end call, these factors may include macroeconomic progress such as currency exchange rates and global pressures on pricing and discounts.

We believe that US health care reform, which is factored into our revised guidance, will only have a modest impact on 2010 Nexavar net sales of less than $10 million, due to specific discount provisions for Medicaid and Medicaid managed care patients.

Business factors influencing Nexavar sales may include the rate of sales growth in Japan, reimbursement timing for countries in the Asia-Pacific region and the dynamics of an increasingly competitive kidney cancer market.

Importantly, we continue to expect non-GAAP profitability for Onyx in 2010.

Looking ahead, we anticipate that 2010 will be another year of important growth for Onyx as we leverage our core strengths, including Nexavar, which is delivering increasingly positive cash flow to our business and an opportunity for the Company to grow margins, and a strong pipeline including our near-term opportunity with carfilzomib and with global rights for several of the assets, giving us the potential to deliver value and generate income as we deliver on our ongoing commitment to managing the business.

With this strong foundation we have the resources and the strategic flexibility to continue delivering compelling results while, at the same time, continuing to build value for our future.

I'll now turn the call back over to Tony.

Thanks, Matt.

We recognize there are business challenges in front of us, and we are managing them.

At the same time, we believe that there are significant value drivers for the business that will deliver robust growth.

Over 2010 we look forward to a number of milestones that will drive momentum for our pipeline, and I'd like to share a few of them with you now.

For Nexavar we expect continued penetration in existing markets.

We expect to report top-line results from NExUS, the Phase III lung cancer study, to initiate the Phase III clinical program in breast cancer, to secure liver cancer reimbursement in South Korea and to present a robust group of top-line data findings at medical meetings including Phase II breast cancer data in patients whose disease advanced despite treatment with Avastin.

For carfilzomib we look forward to obtaining a data readout from the Phase IIb pivotal registration study, to initiating two registration-enabling Phase III studies in the near future -- one an international combination trial and the other the monotherapy registration study in Europe -- and, finally, to potentially filing the NDA by the end of 2010.

In summary, we believe we are well-positioned to achieve these important value creating milestones in the coming year, moving us closer to our goal of transforming Onyx into a leading biopharmaceutical company with multiple products, multiple revenue streams and multiple ways to help patients.

That is the end of our prepared comments.

Operator, if you could provide instructions for asking questions, we'll now take the first question.

(Operator instructions) Jim Birchenough, Barclays Capital.

First, on current Nexavar trends and assumptions, could you maybe let us know where we're at in terms of renal cell sales versus liver cancer sales?

And, going forward, do you think that the liver cancer growth can exceed the attrition in renal cell?

How should we think about that?

And then I've got a follow-up question on Nexavar in lung.

Laura, why don't we ask you to take that particular question?

Sure.

So where we are today in the renal cell business, as you know, in some competitive pressure.

The result of that is that we're looking at about a 15% to 20% global share in kidney cancer.

As we look at the business mix, which is what you're asking, what the growth will look like in HCC, we're looking at it as business mix which would be about -- going towards 70% HCC, 30% renal cell, which would say that, yes, in fact, HCC growth looks like it will be in a good place to outpace any pressures in the kidney cancer market.

So that, I think, Jim, should address your question.

I know you've got a second one; we may have lost Jim?

All right, operator, if Jim comes back in the queue, we'll certainly take his second question.

Thanks for that, and now on to the next one, please.

Jim is back online.

Just looking ahead to some of the ongoing lung cancer studies for NExUS, just wondering if you can comment on management of skin toxicity and other toxicities that really seem to interfere with the ESCAPE study, whether you have any insights as to whether those toxicities were better managed.

And then, in the context of BATTLE, are you looking at K-RAS mutation patients as a subset analysis of either NExUS, or the MISSION study?

Okay, we'll ask Todd Yancey to take both of those questions.

Hi, Jim.

To address your first question with regard to hand-foot skin reaction, the way I would respond to that is on the basis of the entire program.

We learned a lot about the management of hand-foot skin reaction, and I think we have confidence that the investigators' hands with appropriate support, this is an effectively managed side effect and one that ameliorates over the first several courses of therapy.

With regard to your second question, we are very excited about the accumulating and abundant evidence in favor of Nexavar, both for EGFR wild-type patients, which represent anywhere from 70% to 80% of non-small cell lung cancers, but also for patients who have K-RAS-driven tumors.

You will recall that we saw a compelling benefit for patients, regardless of their K-RAS status.

So this continues to support our evolving data set that distinguishes Nexavar amongst the class of targeted therapeutics, regardless of whether or not they are or are not multi-kinase inhibitors.

I think one of the things that we are observing is that if you put this together with some of the recent competitive trial data where agents have had their trials stopped in liver cancer, for instance, and for what we are learning in breast cancer as well, the activity for Nexavar in the K-RAS pathway does seem to be important in terms of overall efficacy in some of these tumors which are tough to treat.

So I think Todd's comments are especially appropriate as you think about the unique opportunity Nexavar has, as distinct from some other kinase inhibitors.

Gene Mack, Soleil.

I'm just wondering if the revised guidance -- is any of that -- is South Korea reimbursement -- is contemplated in that guidance?

So I'll actually ask Laura to make a quick comment about South Korea first, and then Matt on the guidance.

Laura?

So for South Korea, which is a very important opportunity in terms of, you think about the epidemiology of the number of patients in South Korea at 14,000 who are afflicted with liver cancer, we certainly expect to see the reimbursement in the latter half of 2010.

So as we look at the worldwide opportunity and Asia-Pacific opportunity, South Korea we expect to be important over time.

On the guidance front, we have, as Laura mentioned, assumed that we will see reimbursement for Nexavar in South Korea in the second half of this year.

However, given that we will see only a partial year of impact and that it's a launch year, I wouldn't say that South Korea's contribution is particularly significant for Nexavar sales assumptions in 2010.

So it's already in the guidance, Gene.

Jonathan Eckard, Leerink Swann Company.

This is Howard; thanks for taking the question.

Just going back for the guidance, can you talk about what assumptions you had in your guidance, for example, the foreign exchange rate and also the -- are you assuming a price cut in Europe in your guidance?

Matt, why don't you take both of those questions, if you can.

Speak specifically to some of the things that are happening worldwide with global pricing pressures in reimbursement, and then the FX question.

Right, so we, each time we build a Nexavar sales guidance forecast, look at a range of scenarios across a number of different variables inclusive, certainly, of the two that you outlined.

With regard to foreign exchange first, we have seen a significant strengthening of the dollar over the course of the first four months of the year.

We had an average foreign exchange rate of $1.48 per euro as recently as fourth quarter of last year and now see spot rates hovering nearly 15% lower at almost $1.30 to the euro.

As a result, we have rebuilt a set of foreign exchange assumptions reflective of the current spot rates as well as the input from investment banks and others charged with building forecasts about those exchange rates going forward.

So we believe our new guidance encompasses the current rate environment and a range of potential outcomes around it.

With regard to pricing pressures, as Tony alluded to, we are seeing a range of different pricing pressures for Nexavar globally, differing, obviously, in individual geographies.

Together with our partners Bayer, who have responsibility for commercialization outside the US, we have attempted to map those various dimensions into the Nexavar guidance.

And obviously Bayer, being headquartered in Europe, for example, has a particularly good finger on the pulse of potential impacts there.

So, without getting into specifics on a country-by-country basis, we have incorporated those impacts as we rebuilt our guidance scenarios.

But I think it's fair to say, Howard, that our expectation for 2010 is that the larger driver in our sales guidance will be foreign currency, and that the pricing pressures will be relatively modest as we expect some additional changes around the globe.

But both of them are certainly built into the current guidance.

Jason Zhang, BMO Capital Markets.

First, the $20 million that you put aside for the S*BIO collaboration -- is that going to be -- what time frame should we think about that in terms of R&D?

That's the first question.

And then I have two questions about [carfilzomib].

Could you tell us what was the last patient enrolled in the pivotal Phase II trial for relapse/refractory multiple myeloma?

And also, could you give us breast cancer Phase III trial status?

Sure.

So we will take each one of those.

I just want to make a quick comment, Jason, to your question about the S*BIO agreement, then ask Matt to address your specific R&D expense question.

Many of us have watched the JAK2 landscape evolve over the last several months with some very lucrative deals for biotech companies that have assets in that particular space, and are obviously quite pleased with both the attention and the developments scientifically that are happening in this space.

We think that's good news because it suggests that there is increased value to be obtained from these particular compounds.

And from everything that we are seeing with these compounds in the earliest days, these are compounds that have a good degree of efficacy across a broad array of diseases -- hematologic diseases and, potentially, autoimmune diseases.

So we think this can be a very important value driver and are pleased that the space in general is getting so much attention.

That's why we are expanding and working very diligently with our colleagues at S*BIO to accelerate this program and to work harder at racing it to the market.

Matt, can you make some comments on the R&D expense, and then we'll actually turn the carfilzomib question to Michael.

Sure.

So with regard to the S*BIO transaction that was announced today, the transaction is structured in such a way, very similar to our initial transaction with S*BIO back in late 2008, where Onyx will be making a cash payment to S*BIO.

We'll make that $20 million payment during the second quarter, during this quarter.

And S*BIO will then lead the development efforts continuing for the JAK2 compounds.

The R&D expense guidance that I provided and reaffirmed in today's call excludes that $20 million, as that's a one-time corporate development expense.

Michael, the carfilzomib question, then we've got a breast cancer question that will come to Todd.

Sure; hi, Michael Kauffman here.

As you may recall, this is the Phase IIb study called 17100381, at 27 mgs per meter squared in patients with relapsed and refractory myeloma who had disease that progressed on essentially all available therapies.

A single-armed trial, 266 patients, completed enrollment by the end of last year.

So, as we said, we will expect data by the midpoint of this year.

Good, thank you.

And, Todd, an update on the breast cancer program?

So, on the heels of the exciting 74% improvement that we saw when we added sorafenib to capecitabine, we do plan to initiate a confirmatory Phase III registration study that we'll start to register on a global basis in the second half of this year.

I think the only thing I would add to that, in addition to being very excited about the start of that Phase II program, is that we are fully expecting to report out top-line results from the Avastin progressives trial by the end of this year.

And it's quite possible that some of the top-line results from last year's study, the capecitabine trial and the paclitaxel study, may have some additional data before the end of this year as well.

So there's a lot happening in terms of expected data flow and a lot happening in terms of advancing the registration program in capecitabine.

So stay tuned; we are very, very excited about the promise and potential in this important tumor.

Phil Nadeau, Cowen and Company.

Good afternoon and thanks for taking my questions; one for Laura, and one for Todd.

Laura, could you quantify for us maybe a bit more of the headwinds that we are facing in the quarter, in terms of how much did currency affect the quarter-over-quarter sales change and how much did share loss or deterioration of the kidney cancer market affect it?

And then, Todd, for you, could you maybe delineate a few of the major differences between the NExUS and ESCAPE trials that suggest the NExUS trial might work, where the ESCAPE trial didn't?

Phil, actually, what I'm going to do is I'm going to have Matt make a comment on foreign exchange because I think he will give a very good sense of that.

And then I will ask Laura to comment specifically about RCC and HCC again in a follow-up remark.

You've thought about this question in exactly the way that we've approached it.

Foreign exchange was clearly the dominant factor as we had looked at the particularly quarterly progression from the fourth quarter accounting for more than half of the impact.

Relative to fourth-quarter FX, rates deteriorated about 7% between the fourth quarter of last year and the first quarter of this year.

So as you look forward to what the difference is year-over-year and quarter-over-quarter, so year-over-year the quarter grew 20% with the rest of world at 24% and the US at 11%.

When you look at what happened quarter-over-quarter, the first quarter of 2010 versus first quarter of -- and the last quarter of 2009, as Matt said, better than half of the decline was a result of foreign exchange.

The increasing number of entrants in kidney cancer and the Japan falling a bit short of what our expectation was as the launch was a little slower than we would have liked or expected really account for the rest of that.

As we look to where the growth is and the growth is coming from, as I shared in my prepared remarks, both the number of prescribers that are outside of the oncologists, the unique non-oncology prescribers and the bottles that they are prescribing in the US really has improved dramatically year-over-year.

So it's early days in terms of untapping that opportunity.

So, in order, foreign currency, Japan, kidney cancer were headwinds.

And then we had some real strength coming out of where our growth opportunity is in HCC.

As we look to the year, we're looking at better than 10% growth for the brand.

Ted, actually, I'm going to ask you to take the NExUS and the ESCAPE question, if you would.

It's certainly important as we're coming up on our expectations for THE top-line data from NExUS.

So if you could contrast those two studies, that would be great.

I think the main point I would emphasize is that, obviously, these were both first-line studies, but I think the key difference is the chemotherapy backbone, and I think the more we've learned about Nexavar but also just broadly in cancer is that can make a very big difference.

I would also want to emphasize a couple things in addition to the backbone.

With the battle data, I think we've got a clear lesson that monotherapy versus combination therapy is also a very important question, which really leads me to concluding that we really have put together the right program here in lung cancer.

We are looking not only at Nexavar in combination with various pathomes, but we are also, particularly in the MISSION trial, looking at Nexavar as monotherapy.

So I think we've got the program.

We'll get the answer, and I think BATTLE really does suggest that there will be a role for Nexavar in lung cancer.

David Moskowitz, Madison Williams.

Can you give us an update on the dispute that you're having with Bayer over the fluoro-sorafenib compound?

Are you actively talking with your partner, or is this playing out in the courtroom?

And what is the timing of those discussions?

Also, the marketing spend looked quite low this period, and obviously FX, I think, helps you guys on that line item.

Do you think that's going to continue?

And let me ask that in conjunction with the South Korean reimbursement.

Would you expect a significant uptick in marketing spend, or are you already marketing in South Korea, so that the reimbursement is just pure leverage?

And then lastly, the Nexavar Phase II data in combination with capecitabine, the good data that we saw last July, we saw progression-free survival, very basically significant.

When are we going to see overall survival out of that trial?

Could that happen at ASCO?

Thanks.

Okay, sure.

Regarding our dispute with Bayer, I would probably want everyone just to know that, just to get us all on the same page, obviously we filed a complaint last year asserting our rights to a compound that we believe was discovered during the joint research between the two companies.

The court has determined the schedule, and we are engaged in the typical steps of the process and right now are in the middle of discovery, essentially exchanging documents across the two companies to organize the fact pattern.

You will certainly appreciate that there's not a lot more that we can say at this time, but I always like to reassure everyone that we are continuing our focus on Nexavar and working collaboratively with our partner to grow Nexavar in all regions of the world.

We have been able to, I think, effectively compartmentalize the operating aspects of our collaboration and work to grow Nexavar quite nicely.

With regard to marketing spend, a big low for this quarter, I'd make a general comment, and then perhaps Laura or Matt could make additional comments.

I think you can expect a pattern which has expenses lower in general in the first quarter.

And with that we are committing to two things.

As Matt said in the year-end call, an overall commercial margin for the brand of approximately 60%, which should suggest that in general commercial spend will be in line with our expectations to meet that particular target.

And remember, too, that we are moving largely out of a launch mode for liver cancer.

And so, on a global basis, we won't have the same levels on a country-by-country basis that we've had in previous years.

We are going to invest in the Asia-Pacific market, where we've got continued growth opportunities.

But I think that that's going to all be consistent with our 60% commercial margin commitment.

With regard to capecitabine and the -- the overall survival results, Ted?

So, as Todd said, we're very excited to be initiating the Phase III program before the year is out.

And it also would not be unreasonable to expect that we'll have overall survival data from that program.

It's obviously event-driven, but we think that it may be reasonable to see that this year.

But almost certainly not at ASCO, David, to your specific question.

But stay tuned, obviously; because it's event-driven, it's possible before the end of the year.

Chris Raymond, Robert W.

Baird & Company.

I'm just kind of curious about the discussion you had -- I think it was Laura that was mentioning the China reimbursement, you are now planning on 2011.

And understanding that there's a lot of moving parts there and maybe some things that you may not want to discuss, I didn't hear a lot of detail around why.

To the extent that maybe you can give us some more color, that would be great.

Sure.

I think, Chris, what I would say just to lead off, and Laura, I know, will have some specific comments -- we've always been pretty clear that this is a long process in China and our commentary on this has suggested that within the next 12 to 18 months we would expect reimbursement in China.

And we've been saying that since about the beginning of this year.

So the 2011 date is consistent with that guidance, and there's nothing new here.

But Laura, I think, gives an excellent description of the process as we understand it, so I'll ask her to make some very specific comments so this is very clear.

As you know, Nexavar is approved for HCC.

And today in China that's a private pay market where Nexavar has had very nice performance in the last year.

As we look to the underlying need in the marketplace with over 300,000 patients a year dying in China and you look at what the underlying economics are for the country, there's a commitment to providing access to all patients and to providing access to drugs for the Chinese population.

The government has been clear about that.

This process began in terms of -- as we think about what will happen over the coming year or so is this process began last year when the Ministry of -- in China produced, on December 1, the national reimbursement drug list, which sort of started the process, which we expect to be a process of numerous conversations with the various provinces.

So, as we look forward, as Tony said, it's a process which lays out by the national government, by the provinces, by local conversations and the most important part, I believe, is to have life-saving medicine for a disease which is important and a partner that is experienced in the marketplace.

And that's where we are today.

So that's really how we've been thinking about them, why we still are consistent, as was Bayer with looking at 2011 as a reasonable place to be looking for.

Chris, I hope that's responsive to your question.

We are assured and take some comfort in Bayer's presence in China where they have done exceptionally well on a sales basis and are one of the leading companies.

So they have lots of experience in dealing with the Chinese government on this issue.

Our expectation and our hope is that the Chinese government will make Nexavar available to all appropriate patients, and I believe that Bayer shares that with us, as they said on their call last week.

Stephen Willey, Thomas Weisel Partners.

Just a quick question on the breast cancer front, and just wondering how you are thinking about the pivotal Phase III trial design in conjunction with the data that you get out of the Avastin failure trial and whether or not, depending on what you see out of that trial, if you would exclude Avastin receiving patients from entering and how you think that might impact enrollment time lines.

Okay, Ted, would you take Stephen's question?

I think those trials actually stand independent of each other.

The experience that we have with capecitabine was obviously very encouraging, and we don't expect information from the [HUTTIS] trial to inform that trial.

However, the [HUTTIS] trial is very important in that it would provide good information about [us] in terms of the role of Nexavar, potentially, in dealing with the large and growing population of patients that are treated with Avastin and ultimately progress.

So they are independent.

Ling Wang, Brean Murray.

First, I was wondering whether you can help us to better understand the sequential decline of Nexavar sales, especially in US and Japan.

And in Japan there's no competition.

In the US I was wondering whether you can more specifically comment on the volume trend.

Is that in RCC, there is decline, and in HCC there is growth?

Or how should we think about that?

I'm going to ask Laura to comment on both of those.

The one point I would like to make just to start off on the question is the progress that we've made in the US in general with the non-oncology prescribers.

Laura referred to this in the call, with the number of unique prescribers up about 30% or so and the volumes that they are driving up about 40% year-over-year.

So the efforts that we've put in place to expand our commercial presence and to reach these non-oncology prescribers seem to be paying off.

Laura also made a general comment about the number of Nexavar patients currently being treated.

We think there are only about half of the US patients that are under treatment, and we've got specific plans in place to go out and get a portion of the other half that we think we are entitled to.

So lots of things where we are making headway and gaining good progress.

Laura, do you want to comment specifically about anything else on the US and Japan, I think was the other part of the question.

Sure.

So for Japan, as you look at where we are as compared to a year ago, Japan has really had quite strong performance as you are looking at almost a tripling of the business year-over-year.

And of course, that's due to the HCC approval as well as being in the marketplace for RCC.

But you point out correctly that Q1 did fall, as we said in our prepared remarks, short of what our expectations were.

So the launch has been slower than we would have expected, and launches take time.

And as a result of that, and really consistent if you look to what Bayer said last week on the call with their expectations, we do in fact believe that the market will develop well and that Japan will be an important and growing contributor to the business in 2010.

So a little slower than what we would like for where we are today, clearly a contributor to the disappointment in Q1, but absolutely important as we go forward in the business.

For the US, I think Tony's remarks are really very, very important for us to keep in mind.

Yes, we have had some decline in RCC as we are looking at the competitive marketplace, and the US, of course, is the place to see that in 2010, in the first quarter.

And we saw that pressure was in fact offset largely by the HCC growth.

But 2010 and the growth prospects that we see, you will see HCC taking a very strong role in driving the US business and, in fact, driving the worldwide business.

I would just close this particular question by reminding everyone that we receive a royalty from the Japan sales.

So, while the performance in Japan is disappointing, it will not have a direct flow-through impact on our net income.

All right, operator, next question?

Steve Harr, Morgan Stanley.

On this payment around your JAK2 inhibitors, could you help us understand what information you've learned about the drugs that led to this payment and what you think is differentiated about these compounds versus the drugs that are further ahead in development?

And then, three, when and what type of clinical data would lead to your next set of milestones?

And I have a separate question when you're done with that.

Okay, I think actually this is a question that Todd and Ted will have some commentary on.

Ted, would you start?

And then, Todd, you might have some additional comments as well.

I'll be happy to.

Steve, it's interesting that one of the things that I've been involved with prior to coming here was actually funding a company that had the JAK2 inhibitors.

So I've looked at the JAK2 inhibitors pretty carefully even before considering coming here and was very impressed with the data that had been generated with the S*BIO compound.

Specifically, I believe these are the only compounds so far that have demonstrated efficacy, encouraging efficacy signals in lymphoma.

Clearly, we've also demonstrated promise in myelofibrosis and the other kind of associated, typical JAK2 mediated disorders.

And most impressively, perhaps, we've demonstrated so far a very encouraging safety profile, particularly around myelofibrosis as being one of the liabilities of others, on some of the other programs that look encouraging here.

So I really personally like these programs, and I think this deal in its inception was a very smart move by Onyx.

And, I think the infusion of additional monies to accelerate these programs is a very smart move.

So, Todd, would you want to add some more of the science?

Yes, I'd offer two points.

I think that the molecule as you have characterized it has tremendous potential for patients in oncology and in non-oncology applications and that we should take the opportunity to develop a full understanding of the application of the molecule.

Additionally, I would also offer that we've developed a tremendously collaborative relationship with our partner there and we want to optimize the relationship and accelerate the program all at the same time.

So the science is exactly as you characterized it.

I think the opportunity has some unique features, including the differentiating safety profile of the drug.

And then the final piece is I think we have a very clear understanding of what an accelerated path to a first indication would look like based on what's happening in the broader landscape for the development of these types of agents.

Steve, I'm sure that you and others will know this, but one of the biggest issues with these compounds are some important [AE's], as Ted and Todd have mentioned, specifically neurotoxicity, myelosuppression.

And so far, in the results that we have seen to date, those do not seem to be significant issues for these compounds, suggesting that if we can maintain that and marry that with a strong efficacy profile, we could, as I said in my comments, have one of the best in class compounds here.

So we'll see.

We are advancing these molecules, and this infusion of cash is meant to accelerate the program in a meaningful way.

And I think, Steve, you had another question?

Yes.

I just wanted to get your thoughts -- you guys have a pretty significant exposure to currency volatility, given that pretty much your entire infrastructure is in the United States.

I know you run trials outside the United States.

You have the profits with Bayer, but the company itself is mainly in the United States.

And the vast majority of your sales are ex-US, but you don't hedge.

What is the thought behind that?

Is that a policy that you're thinking of reevaluating, given the volatility that it has given to your top line over the last couple of years?

Okay.

Matt, would you take that one?

Sure.

I think you have hit on the key points that accurately characterize our thought process around this topic.

As you've correctly laid out, the largest fraction of current Nexavar sales are outside the US.

That's also the fastest-growing portion of Nexavar sales.

I would probably add a little bit of color to your characterization on the expense side, however, in that, similarly, the majority of the collaboration's expenses, both in development and commercialization are also outside the United States, particularly programs like the liver cancer trials and a sizable fraction of the other development programs that are underway and then, obviously, a sizable fraction of Bayer's commercial expenses in the countries where Nexavar is marketed.

So we do have a sizable natural hedge built into the Nexavar business.

In addition, as our development programs outside of Nexavar expand, those too will by and large be global programs and we'll have an opportunity to enhance the natural hedge in our business through denominating agreements and expenses in other than US dollars in the rest of our business.

All of that said, we are actively evaluating and continue to actively evaluate whether a more structured hedging program would make sense for the business.

We don't currently have one in place, but that's something that we are actively monitoring.

All right, operator, I think we probably have time for two more questions.

Please, let's take the next one.

Jessica Li, Goldman Sachs.

So you're starting a European trial of carfilzomib monotherapy versus best supportive care.

I'm just wondering whether you would intend to supplement the FDA's filing with this European trial and whether that's possible and how, if that's the case, and if you think that will strengthen your filing package.

I'm going to ask Michael to take that question.

Michael?

Sure, thank you.

So, the plan in Europe, which has been discussed extensively with the European regulators, the CHMP, is to do a study in relapse and refractory patients, who will receive monotherapy carfilzomib against best supportive care therapy.

The general feeling in the United States, and this has been discussed with key opinion leaders throughout the US, is that this trial design is not appropriate in the US, and we won't be pursuing this as a US path to registration at this time, but that the single-arm study would be sufficient for at least a submission to FDA for accelerated approval in that population.

I think, operator, we will take our last question, please.

Cory Kasimov, JP Morgan.

Good afternoon; actually, this is Mona here on behalf of Cory.

I just had two quick questions.

One is, I wonder if you could update us on your plans to partner carfilzomib outside the US.

And the second is, did I hear you correctly that Nexavar is approved in Taiwan?

And if so, what are your expectations on the timing of reimbursement there?

Okay, I'll close out with both of these.

Yes, thanks, Mona; Nexavar was indeed approved in Taiwan, and on schedule.

We are quite pleased with that move in this important market for us.

Just for context, Taiwan represents about 10,000 annual cases with a great opportunity, just based on the sheer numbers of patients.

And we would expect reimbursement to follow about a year after; this seems to be the pattern of the Taiwanese government.

And we think that Nexavar shouldn't be any exception there.

So great news on the approval, and then about one year on the reimbursement.

And then, with regards to our partnering carfilzomib, we've said since the time of the acquisition for carfilzomib that there are certain markets around the world where we do not intend to commercialize carfilzomib independently as Onyx.

And a good example of some representative markets could be the Asia-Pacific markets and Japan, in particular, where we would seek a partner for the special restriction pathway that's peculiar to Japan.

So those efforts are well underway.

We have been, I think, not surprised but certainly overwhelmed by the strong interest from a number of partners to look at sharing the global development responsibility for carfilzomib.

We think this provides an underlying commentary of the value of this compound and are really pleased that so many people are participating in this conversation.

So, as we draw close and are prepared to make our announcement about partnerships, we'll certainly keep you posted.

But we are very, very pleased with what we've seen so far on that score.

I think, operator, with that, I'll make some closing comments and then we will finish the call.

We are indeed pleased, as you can hear, with the evolution of the Company, quite happy with the pipeline, the pipeline's progress, Nexavar's performance year-over-year.

And while we do have lots to do with Nexavar, there's a lot of opportunity ahead.

We've got growing clinical momentum, an innovative pipeline, and each of these things give us some promising opportunities to do what we love to do, which is to transform the treatment of cancer.

Thank you for joining the call today, and we look forward to our future interactions with you.

Thanks, operator.

Thank you.

Ladies and gentlemen, this concludes today's conference.

Thank you for participating.

You may all disconnect.